The New Year is an opportunity to reset and reflect on your present condition and ways to improve. One thing all members of the construction industry, from owners to contractors, should do is check in on their insurance policies and consider if they have appropriate coverage. This is especially important if there is a downturn in the economy. If the economy does slow down, many more owners and contractors may vigorously attempt to obtain insurance coverage for defense and indemnity coverage. With that in mind, here are some starting points for your insurance checkup.
Confirm Your Coverages: Regardless of your role, the most important step is to ensure you have your actual insurance policies that may cover your work or projects. Certificates of insurance are good to have, but usually by themselves do not provide coverage, so you need to have and understand the provisions of the policies you may one day seek to enforce.
If you are a contractor, not only do you want to have the coverage you think appropriate for your business, you also need to ensure that your insurance coverage satisfies your project requirements. On the first, it may be prudent to have a meeting with your insurance broker each year to determine what insurance coverage you need. On the second, it also may be prudent to send the insurance provisions to your insurance broker BEFORE you sign your contract so that you do not become the “insurer” for some insurance coverage that the contract required and the loss should have been covered by the required insurance, but you didn’t have such insurance coverage. Most (if not all) contracts include requirements for what type of coverage the contractor needs to provide. Examples include workers’ compensation, CGL and/or pollution coverage. Before signing is the best time to know what they are, but it will not get better if you ignore a problem.
Likewise, if you are an owner, you should pause to consider what insurance you actually want your contractor to provide. While coverage is critical and it is tempting to “buy it all,” a prudent contractor will pass that cost on to you. Your contractor will buy the insurance you require in the contract, but you are likely ultimately paying a higher cost to the contractor if you require too much or unnecessary insurance. It is up to you to balance the risks you are willing to face versus immediate savings.
Dates: With the new year, now is a good time to ensure your policies cover the appropriate time period. For example, if you started a job back in late 2021, now is a good time to double check that there is not a temporal limit to coverage (i.e. coverage did not end in 2022 for work continuing into 2023). This is especially important for jobs suffering from delays or other time extensions, possibly due to supply chain issues or labor shortages.
Claims: Consider what has been happening on your projects and if you need to put your carrier on notice of any claims. Have you heard whispers around the water cooler that things are not working right or is there a recurring design problem coming up during meetings? Now is the time to press for details and evaluate if you have a claim. Notice periods may be set forth in your policy and can be shorter than you anticipated and will likely be used as a way to avoid providing coverage. Also, keep in mind any statutes of limitation or statutes of repose.
Tender: Related to timely submission of claims is ensuring you know how to tender. Failure to follow the policy’s procedural requirements could lead to denial of coverage.
Review any Reservations of Rights: If you have made claims, understand what your carrier is telling you. Are they denying coverage outright or looking for more information? Consider what the carrier’s letter says and respond accordingly.
While not an exhaustive list, the above is a starting point for your insurance checkup. If you have further questions, consider contacting your broker or agent, or otherwise your attorney for advice.
